By: Justicia Shipena
Despite recent reports that countries are moving away from the US dollar, Namibia’s central bank is not considering allowing the country to purchase goods such as oil in its local currency.
This comes as The Villager in May had reported that, if Namibia signs agreements with central banks of oil-producing countries, it can make it possible to purchase oil in its local currency.
Bank of Namibia (BoN) Governor Johannes !Gawaxab said this is something the central bank is not considering at present.
“Not at all. You need to understand our currency arrangement. We have a fixed exchange rate arrangement with South Africa. Our currency is pegged to the South African rand,” said !Gawaxab at State House on Tuesday to questions posed by The Villager.
At present, Namibia purchases its fuel in US dollars from countries such as India, United Arab Emirates (UAE) and South Africa.
Furthermore, five major African banking groups have signed agreements to integrate the new Pan African Payment and Settlement System (PAPSS) into their operations.
It is a system that allows the banks to transact across borders using their own local currencies. Access Bank Group, Ecobank Group, KCB Group, Standard Bank Group, and UBA Group inked Memorandums of Understanding with PAPSS on June 19 at the opening ceremony of Afreximbank’s 30th Anniversary in Accra, Ghana.
!Gawaxab did agree, however, that there is a current situation in which the primacy of the US dollar is being questioned.
Others, he continued, are proposing alternate currencies for international trade.
However, he stated that this has been a long-running dialogue. “It is not the first time the idea has been raised.”
“Namibia is not there yet because our currency is not free floating. We are part of the fixed exchange rate with South Africa,” he added.
!Gawaxab went on to say that there are two major factors that will determine if people switch from using the US dollar as a reserve currency to another alternative currency.
“The first one is we need to understand that oil is currently priced in US dollars. So as long as oil is priced in US dollars it is going to be difficult to move away from the US dollar as the reserve currency,” he explained.
!Gawaxab stated that the second issue will be a challenge as long as any substitute or reserve currency is not convertible and liquid enough.
“But there are countries that are thinking that we probably need to consider an alternative regime for international trade and as a reserve currency,” he said.
A month ago, Kenyan President William Ruto urged African leaders to take the first steps towards replacing the US dollar as the world’s reserve currency by establishing a pan-African payments system to encourage intra-Africa commerce.
n an effort to combat the country’s continuing dollar shortage, the Kenyan government has signed an agreement with three international oil companies that will allow the African nation to purchase oil using Kenyan shillings.
Ruto accused oil cartels of hoarding dollars in response to the dollar crisis which has caused a fuel shortage in Kenya.
Some countries throughout the world have made this decision.
Iraq prohibited US dollar transactions this year. At present, the Saudis and Emiratis stated that they intend to sell oil without it.
Meanwhile, Saudi Arabia’s Finance Minister stated that his country is willing to sell oil in a variety of currencies, including the euro and the Chinese yuan.
According to data from the IMF’s Currency Composition of Foreign Exchange Reserves (COFER), the US dollar accounted for 58.36% of global foreign exchange reserves in the fourth quarter of last year.
Analysts say that changing global economic dynamics are driving the so-called de-dollarisation trend, which can help local economies in a variety of ways.
